American Home Mortgage to shut
The residential lender said its bankers cut off credit, so it can't fund mortgages.
American Home Mortgage Investment Corp. plans to shut down, becoming the second-biggest residential lender to fail this year as bad loans spread to people with good credit records.
The last day for most employees will be today, chief executive officer Michael Strauss told the staff in an e-mailed memo obtained by Bloomberg. Investment bankers cut off credit earlier this week, leaving the Melville, N.Y., company unable to fund mortgages it had promised to thousands of now-stranded borrowers.
"Conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that our business is no longer viable," Strauss wrote yesterday.
Investors have punished shares of U.S. home lenders as defaults spilled over from subprime borrowers, who have poor credit histories, to people with more reliable records. American Home specializes in mortgages for people with good credit who do not qualify for loans with the best terms.
Mary Feder, a company spokeswoman, did not return a call seeking comment.
The stock, which traded at almost $40 two years ago, fell 3 cents, to $1.45, yesterday in New York Stock Exchange trading. Friedman Billings Ramsey Group Inc. analyst Paul Miller said the price was headed for zero.
"The next announcement will be the liquidation of the company's assets or some type of sale of the origination and servicing platform," Miller wrote in a note to investors. "We do not believe the common shareholders will have any recovery."
Strauss founded American Home in 1988. His e-mail announcing the shutdown was reported earlier yesterday on the Web site of Newsday, the Melville-based newspaper. The company employed about 7,400 people at the end of 2006, according to regulatory filings. Last year, it made almost $60 billion in loans.
More than 70 mortgage companies have sought buyers or have closed since the start of 2006, according to Bloomberg data. Of those, at least half a dozen have declared bankruptcy. The largest was New Century Financial Corp., based in Irvine, Calif., which is being liquidated.
Earlier yesterday, Accredited Home Lenders Holding Co., the subprime-mortgage company being acquired by Lone Star Funds, cast doubt on its own sale and said bankruptcy was possible. The shares lost more than a third of their value.
"Several of our competitors have recently stopped originating loans or sought protection under bankruptcy laws," Accredited, of San Diego, said in a regulatory filing yesterday. "We may suffer a similar fate."
American Home offered Alt-A mortgages, an alternative for A-rated borrowers who cannot satisfy all the terms for a regular prime mortgage.